Readers' comments

Today French Supreme Court rejected an appeal against the ban on extracting shale gas in France. Starting from today shale gas extraction is illegal in France. How come they don't want to become the second Norway? Just don't tell me that they banned the use of this controversial technology in France for no reason at all.

best part of this post is The current regulations are inadequate. It can take over a year for companies to obtain the permits to change their work programme
thanks
Regards
Emily.BronteCities to Visit in Minnesota

"In recent years Warsaw has found itself alone in resisting demands from Brussels to adopt more stringent emissions targets."

In recent years Warsaw, i.e. Donald Tusk "government" and Radek Sikorski's "diplomacy", has been making a dog's dinner of "resisting" stringent demands regarding emission, too. Their predecessors had agreed to set targets but with base year being 1990. This encompassed the dismantling of communist-era heavy industry, so the emissions targets would have been met with a huge surplus. When Tusk and Sikorski took over, they agreed to base year being 2005, thus the problem now.

This was very much in the Polish news a couple of weeks ago. But of course, just like he "mad and messy" regulations, this is what you have when the mainstream media are so totally uncritical of a government for six years.

1. All subsurface resources in Poland are State owned.In the USA the surface land owner also owns the minerals below ground level, which encourages the latter to allow oil/gas companies to drill on his/her land. In Poland local landowners resist any drilling as they get nothing from it.
2. Shale gas/oil deposits in Poland are deeply bedded (at least 4km down) whereas in the USA they are geologically shallow. New technology is therefore needed.
3. Polish State legislators, both Parliament and the government have made too many easy assumptions. They forgot that private companies (mostly foreign) take a business risk of a high exploratory spend for possibly/probably zero return (most drilled wells are "dry"). Instead of encouraging exploration the regulations are designed to strangle it in favour of Polish State owned companies which have little experience, if any at all, in the technology to be used. The regulators clearly ignored the fact that oil/gas companies can look elsewhere for a more positive business environment.
4. Those companies that remain in the game are mostly Polish State owned, with little or no experience of drilling for shale gas/oil.In North America and elsewhere, State owned comanies are not involved in the business.

The whole shale gas episode in Poland looks like a damp squid. It would be far better for the Poles to concentrate on extracting methane gas from their extensive deep coal mines (average depth is already 1km), which gas already has to be continually flared off if miners are to work at those depths. Some of that methane is already burnt to produce electricity for the minimg operations. Of course such production will need to be connected to the local gas grid. It should be pointed out that Poland's major coal resources lie where there are large urban concentrations of population. Thus distance to market will not be an issue. Energy diversification, including importing LNG from a variety of sources plus encouraging renewable power generation (which means modernising the grid and allowing multiple connectors for producers) will reduce the current dependence on expensive Russian gas.

News item, - July 11 – Royal Dutch Shell may expand its presence in Ukraine by tapping existing and reviving exhausted natural gas wells that, with the help of new technology, may increase output by 30%, the government reported.

Shell has been preparing to start drilling for shale gas in the Kharkiv and Donetsk regions, but the new projects may further expand the company’s involvement in Ukraine.

I just wanted to correct point #1...in the United States land surface rights do not inherently guarantee mineral rights...these items are two separate entities meaning one can buy the surface land rights of a property but also need to purchase the mineral rights if they wish to own what is below the surface....Also interested to note are water rights, however this is a whole different ball game and differs from state to state.

LOL, the Poland shale gas wet dreams proved to be a dream of a zombie :D

Here is why Poland shale gas is a butt of any joke:

1. The US EIA estimates about the Poland shale "recoverable deposits" are nothing but a big lie, disproved even by the Poland own geological survey. The US shale gas pushers got cot lying multiple times.

2. Presence of shale deposits does not warrant that the area will provide industrial quantity gas or/and oil concentrate. The experience with the US fracking demonstrates that only a handfull of cites produce meaningful amount of gas and the deposits are unpredictable. No wonder neither Exxon nor Talisman found any meaningfull amount of shale gas in their drills and decided it is not worth to waste time and money.

3. Even if Poland shale miraculously give some gas the US experience prove that the shale gas technology is extremely inefficient due to fast exhaustion of the drills (~45% in a year), so the US fraksters were drilling like crazy thousands new wells to keep the flow. All this drives the production price way up.

4. The US fraksters shoot themselves in the foot and went broke unable to survive low natural gas prices. The Exxon boss spill the beans about the dire state of the shale gas producers :

On Wednesday Exxon Chief Executive Rex Tillerson broke from the previous company line that it wasn't being hurt by natural gas prices, admitting that the Irving, Texas-based firm is among those hurting from the price slump.

"We are all losing our shirts today." Mr. Tillerson said in a talk before the Council on Foreign Relations in New York. "We're making no money. It's all in the red.""

No wonder GAZPROM poke fun on the US shale gas ineptitude and stupidity due to inherent US greed :

"March 30, 2013 16:57 The extraction of shale gas in the US is unprofitable and this “soap bubble will burst soon,” believes the CEO of Russian gas giant Gazprom Aleksey Miller.

“Currently, there aren’t any projects that we know of where shale gas production would be profitable,” Miller stated, adding that “absolutely all the boreholes” are in the red.

There is an opinion that the whole thing is just a “soap bubble,” Gazprom head pointed out in an interview with Rossiya 24 TV channel.

The US “is not a competitor” for the Russian energy giant, Miller stated.

“We are skeptical about shale gas,” he said, as cited by Interfax. Therefore, Gazprom sees “no risks” for itself in the development of shale gas energy in the US. America still remains a country with a deficit of gas – it is the largest gas market and the largest consumer of this fuel, Miller said."

If the US can not compete then Poland stands no chance at all, heh, heh, heh :D

5. The US fraksters experience demonstrates that in 2012 the shale gas investors LOST over $8BN - they pumped over $40BN and produced less than $32BN worth of gas. Good job, Poland most definitely will follow the same suit :D

6. Poland has no infrastructure to distribute their gas if they have any - this is an US assessment.

7. The US fracksters proved to the world that the shale gas extraction is dirty and have serious environmental impact upon the underground watter resources as chemicals used by them are found in the watter wells in the vicinity of the drills.

It's more than visible this is Russian propaganda, whatever Russian agencies say remember there is not free speeech in this country, especially in crucial energy sector. Why you are so happy about US and Poland allegedly not being able to compete with Russia? Are you employed by Rusian authorities ?

Domestic use is paramount. This will ensure sustainable growth and better environmental laws.
Shale gas MUST be retrieved without destroying water aquifers.
Money over the environment is bad news. Maybe not for foreigners.

You mention deposits off Cyprus. Russian Gazprom has already offered its "services" to Cyprus and anyone interested. Just to make sure gas supply monopoly to Europe remains in their hands. Lets get that TAP pipeline project via Turkey and Greece started without delay.

The Exxon Mobil exit was likely a strategic move to take advantage of the huge potential of Russia's Bazhenov shale which was announced around the same time of their exit. Also consider they didn't' surrender the licenses: They're up for sale so they can't be truly worthless.
Talisman's exit is much more to due with realignment in Canada and their new Chinese owners than anything to do with Polish rocks.

Politics changes, but the rocks are eternal and as Pawel points out, they still look really good. We'll hear some good news from the likes of BNK, San Leon, Wisent and 3 Legs this year, and the news will not only be about gas. Releasing oil production in Poland could be transformative as well.

But Poland is instructive as a negative example of how despite the top level supporting shale, it has to get down to all levels. When we see mad planning regulations where drillers have to wait 18 months to go horizontal from a vertical well for example, we can understand the frustration.

As such, Poland gives an example to be avoided to the UK on how to squander what could be great national resources that belong not to the gas companies, but to the people.

Poland, as in New York State, also underlines the possibility that if you play hard to get, you may end up with nothing. Five years ago, Poland looked like the only hope in Europe for shale. Today, everyone has it. That is something governments also need to consider.

"if you play hard to get, you may end up with nothing. Five years ago, Poland looked like the only hope in Europe for shale. Today, everyone has it. That is something governments also need to consider."

You are right about playing hard to get and getting little or nothing. This truism has been proven hundreds of times in mineral resource development. Its not too late for Polish government to consult with and to learn from other resource rich countries.
Canada's exprience in encouraging, but also in controlling long term exploitation of that country's huge oil sands deposits in Alberta comes to mind as an example worth learning from.

The article well summarizes but fails to directly name the process undegoing in Poland. Which is a tug-of-war between Polish state and some of the investors.

The logical line of the article:

1. investors complain Poland ignores their demands (about rights to FUTURE use of the gas)

2. the legislation regarding shale gas extraction is poor

3. two companies withdrew though only 40 wells have been drilled so far, one company withdrew after drilling just two wells, the other cited unsatisfactory results as the reason.

What article fails to directly mention is that

A. the remaining companies - PGNiG, Petrolinvest, 3leg resources, Orlen, to name a few I remember- though indeed complain that their demands are not being fully fulfilled still drill around the country. So it is not really the mad and messy regulations that are the reasons of redrawal.

B. all wells drilled so far confirmed shale gas existence

C. Poland is now very sensitive to 'bonanza seekers' - firms that don't look for fair business but which in the past intended to use lack of experience of Polish decision makers and managers grown up/educated in pre-1989 times. Few examples of such bad deals: FIAT plants, F-16 warplanes deal, motorways building contracts. In the latter example - the authorities were virtually blackmailed prior to soccer cup EURO2012 'we will finish the road if you pay us more'. No such hurry in case of shale gas - on the opposite the later commercial extraction starts the better for the environment since the works on fracking methods with minimal impact on environment are underway.

D. Poland is trapped in energy dependance between Germany - acting very selfishly here - and Russia which uses energy as a tool of policy.

Poland does not get any meaningful assistance or backing from EU in building safe energy market, despite her vulnerable position.

Much of what is written and said about shale gas and generally energy market in EU and in Poland is the direct result of two sets of lobbying - natural gas providers and green energy producers.

.
In effect - I tend to think it will be very hard to change mind of Polish authorities which are positive about the need to use local coal deposits and shale gas. The main opposition party seems even more determined than the ruling one, to provide relative energy independence by increasing the role of local sources in energy production.

Forlana
Yours is a good summary of the situation as you see it. I would offer a comment on a couple of your points:
a)'the legislation regarding shale gas extraction is poor'
This is, of course, at the very root of the issue. The fact that 'the mad and messy regulations' (your words) have not caused ALL companies to stop the drilling is not a proof that the others regard the regulations as satisfactory. Surely, the existence of 'messy regulations' in coal mining, or in the forest industry, or elsewhere, would have comparable negative impact. Lets keep in mind: the old communist style central planning does not work. Period.

b) You said: 'Poland is trapped in energy dependance'. Of course it is, all thanks to energy policies inherited from the decades of central planning by the experts of the 'Peoples Poland'. As we all know, Poland is not the only European country to be so 'trapped', nor is it, in relative terms, in the worst position in terms of energy balance. Poland's rich coal resources and apparently plenty of shale gas underground are good evidence. Plus, to Poland's credit, the country has already made a huge step forward towards opening up LNG terminal on the Baltic. Meanwhile, it was and remains Poland's decision to reject a nuclear energy option keeping in mind decisions made with regard to nuclear power by a multitude of countries of about the same size or more.
The bottom line is that Poland's energy needs will not change by blaming now decades old Gazprom's monopoly in Central and Eastern Europe but by reducing that monopolistic influence in cooperation with other European countries. Helping to speed up commercial development of Poland's shale gas resources should be the country's policy priority. And expanding the scope and transit capacity of the LNG on the Baltic coast should be another priority.

Plus the companies which suspended drilling have found out that neither easy money option is secured by the government, nor the extraction is as easy as where they gained experience (US). However you are completely right that the legislation should be clear and logical, even if no easy money opportunity is provided.

With your (b) point I almost completely agree of course, though it is not clear to me why getting to the shale gas deposits ASAP would be more beneficial than doing it as long as possible to maximize the local profits. Even if that would mean doing it step-by-step without the help of experienced and blessed with high solvency ratio American companies. Also, I tend to think that developing the nuclear energy production in Poland is simply the best way to get clean, safe energy in a country with no winds, few waters and moderately sunny.

As to the nuclear power option, somebody in Polish scientific-technical hierarchy should become more vocal about world-wide record and the relative benefits and risks of nuclear. Coal mines worldwide are known to have had tragic accidents. LNG is not without risks. Neither are gas pipelines that most of Europe has lived with for at least half a century. Its all relative.

The good news is that the gas will stay down there if it is not extracted fast.

San Leon Energy is buying the reserves from those who quit, and it is said has local oligarchs like Kulczyk as shareholders. The driling news from Lewino-1G2 is optimistic. For longer term investors there will be opportunities because Poland has to sort this out and the Polish economy does grow faster than average despite really clunky government (even if no one understands why)

"..Companies that have already invested millions of dollars drilling wells are also worried the proposals do not give them a legal guarantee to transfer their existing exploration licenses into production licenses.."

Whoever drafted that kind of legislation obviously should be sent back for retraining in resource economics starting with Economics 101.

A countries oil related woes usually begin when it starts generating lots of money for the state through exports rather than generating enough for internal use. This middle ground would be the best for Poland.
-
This would also be good morally as it thumbs the nose at Russia's attempt to use resources as a means of controlling their neighbours. Russia is bad enough for its own people let alone when it interferes with its neighbours.

Just one problem: if you export, you get more money (and money is needed, especially in shale gas extraction procedures -no free meals, no free drills...-). So you have to choose: more sure money now, or the perspective to thumb somebody's nose tomorrow (and in the meantime remain with less or no money at all)?